Diabetes Payer-Addressable Burden: An Actuarial Analysis

Whitney Schwark Pratt, Zhenxiang Zhao, Beth Mitchell, Kevin Ashpole and Karl J. Gregor

North American Actuarial Journal, 2019, vol. 23, issue 3, 386-394

Abstract: The Payer-Addressable Burden (PAB) analysis describes the total allowed cost of care curve and seeks to identify opportunities to address those costs. The objective of this study is to describe health plan financials from an actuarial perspective for members with diabetes, including members with serious emergent hypoglycemic events. Data were obtained from Optum’s proprietary database, and medical and prescription claims were evaluated using an episode grouper program, Symmetry® Episode Treatment Groups, to aggregate allowed claim costs from the claims. The aggregated allowed costs were summed to produce a total allowed cost for a specific episode of care (EOC) for each patient. Analyses were conducted across three successive 12-month periods, from April 2013 to March 2016, and described allowed costs with EOCs based on commercial and Medicare Advantage Part D (MAPD) plans, type 1 diabetes (T1DM) and type 2 diabetes (T2DM), and hypoglycemic events. Three areas of allowed claims costs were analyzed: diabetes-specific PAB (dPAB), comorbidity-associated PAB, and total PAB (tPAB). A health plan actuarial and financial perspective was used and focused on average annual allowed cost per member with diabetes. A total of 631,888 commercial members and 549,960 MAPD members had both medical and pharmacy benefits and were included in the analyses. The tPAB costs were two to three times higher than the dPAB costs at each study year for both commercial and MAPD members, but the annual trend in average cost per EOC was higher for dPAB than for tPAB. A higher proportion of commercial and MAPD T2DM members with a claim for a hypoglycemic event were in the highest dPAB cost category versus members without a claim for a hypoglycemic event (commercial: 56% vs. 2%, respectively; MAPD: 75% vs. 2%,respectively). Comorbidities cost an average of 31.2% or 28.0% more when commercial or MAPD members, respectively, had diabetes versus not having diabetes. The average annual dPAB and tPAB were noticeably higher for members with a claim for a hypoglycemic event versus those without a claim for a hypoglycemic event. Because of a much higher prevalence and aggregate allowed cost impact of T2DM members, actuaries may focus more on T2DM members when making financial decisions, despite the fact that T1DM average annual allowed costs per member are much more expensive than T2DM average annual allowed costs per member. Return on investment analyses should be conducted to better understand the addressability of diabetes costs.

Date: 2019
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DOI: 10.1080/10920277.2019.1566077

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